If you don’t pay your taxes, and you are found out, you could end up with large fees occurring interest – or much worse.
Doing your taxes is a tiresome and tedious but not doing your taxes…well that could be quite a bad decision.
The IRS is the department that you generally work with and if you owe money on taxes, you must not stress. They are very good to work with as long as you do the right thing. If you decide not to file your taxes, that is another issue.
There is a deadline for paying your taxes which is April 15th.If you feel that you are unable to pay by that date you can ask for an extension. This is done by filing a Form 4868. If you don’t contact the IRS you can be charged fees if you fail to do this.
If you don’t pay your taxes and you don’t contact the IRS, you generally receive a letter from them and if you don’t pay your taxes, the IRS can file your taxes for you which can be very costly to you as they can file you with only one exemption and as a single person. Using this, your taxes will be calculated with interest.
As much as it would be great not to have to deal with doing your taxes, the amount you may have to pay back over a 3 year period if you owed $30,000 is approximately $2,500 in back taxes and about half of that amount would be penalties for not filing your taxes. This amount doesn’t include the interest on top.
The interest rate is usually quarterly and the compound interest is daily so the interest that you would pay would be approximately $160.
It is assumed that if this was just bad judgment and you decide to pay your taxes later on, you should remember that you will have extra to pay as well as interest. If you were to have professional help preparing your taxes, it may have cost less than what it will after the interest has been added to the amount you may have to pay.
There are some huge disadvantages if you don’t pay your taxes. The biggest one is that if you fail to pay your taxes and owe a large amount of back taxes, the government may put a lien on your property. This is usually done on your home. If you go to sell your home in the future the government will take the amount that you owe before you get the rest. The other disadvantage is that if you don’t pay your taxes, it can show up on your credit report as an unpaid debt and can have a very negative impact on your credit. This can affect any future loans you may apply for in the future.
This will make any sort of financial choices that you may make very difficult. You could even be looking at jail time. This can depend on whether you are financially able to sort this out and as long as the government is assured that you’re not trying to defraud the government.
Another scenario is you may have your property seized to pay the debt or your wages be garnished. On the other end of the scales, if you owe the government, any refunds you would be getting will go straight onto your debt, whilst you will still keep getting charged interest on the amount owed.
It can take some time for the IRS to determine that you owe money and the longer you take to pay, the higher the debt will be. If you are having financial problems, talk to someone at the IRS. They can be helpful at setting up a payment plan.
It is better to be upfront and honest with the people at the IRS. If you are honest and explain your dilemma, you should be able to set up an Installment Agreement Request. As long as you work with them, they will work with you.
As a last resort you can settle the debt for less the full amount by submitting an offer in compromise. It is quite difficult to get this exception. It is usually only agreed on when the IRS know that they cannot get any more than the offer in compromise.
It is better to contact IRS and arrange the Installment Agreement, especially if you’re behind for over a few years. You will still owe extra money because of interest – but if you had paid your taxes when they were due – this would not be the case! It can cost approximately $120 to set up a payment plan if you are to post the payments. It is about half that if you have it direct debited from your bank account.
Some people don’t have to pay taxes because they don’t earn enough money. If you do owe money, and don’t pay your taxes, this can mount to rising tax debts and a credit score that is continually going downhill.
If you don’t pay your taxes, you can be certain of one thing… owing IRS is not a good idea and your credit score pays dearly.